Service Tax - Rice is not an Agricultural produce! CWC (meekly) accepts Revenue Interpretation. Rice to be costlier
RECENTLY we had carried an article, Service Tax - Isn't Rice an Agricultural produce? wherein the author referred to the Finance Minister's clarification that ‘RICE' is not covered under the definition of ‘agricultural produce' found in Section 65B(5) of the Act. The author had suggested that the Minister for Consumer affairs, Food and Public distribution should allow/direct the Food Corporation of India to challenge the FM's decision before courts of law since the statement of the Hon'ble FM is not the law on the subject.
But the Central Warehousing Corporation which originally raised this doubt has caved in and meekly surrendered to the Finance Minister that rice is after all not an agricultural produce and in any case had they gone to the Court, the wise judges would have ruled that Parliament is free to legislate and there is no bar on declaring that rice is not an agricultural produce and that coal is food or that steel is edible oil - if Government says rice is not food, it is not food - whether you eat it or not is immaterial. Well, that's how laws are made and interpreted.
Coming back to our rice story, as early as in October 2012, three months after the negative list regime came into existence, the CWC (hereinafter this refers to the Central Warehousing Corporation and not the political CWC) wrote to its officers that pending clarification from the Finance Ministry, the Corporation would continue to treat the Rice stored by Food Corporation of India (FCI) or any other Central or State Government Agency or the Department as an 'Agricultural Produce' and thus exempt from the levy of Service Tax both on its Storage as well as Cargo Handling.
But the clarification came from the FM on 8.11.2013 and the CWC decided that Service Tax has to be collected from all customers including FCI with effect from 01.07.2012 on storage and cargo handling charges (handling and transport of cargo) of Rice. The CWC directed its offices to deposit the Service Tax under the VCES before 27.12.2013. The CWC also directed its officers to pay Service Tax from 01.01.2013 to 30.11.2013 with 18% interest.
So, your rice is going to be costlier because the Finance Ministry thinks that rice is not an agricultural produce. The Finance Ministry officials who interpreted this legality of what rice should be thankful that the tea boy who is waiting to become PM is not aware of this clarification (yet) - what an effective point it would make in his election speeches!
CWC Circular No 63, Dated: October 11 2012 and CWC Circular No 76, Dated: December 17 2013